1 00:00:01,400 --> 00:00:04,120 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 2 00:00:04,120 --> 00:00:06,200 Speaker 1: with my co host of Bonnie Quinn. Every business day 3 00:00:06,240 --> 00:00:10,360 Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts, 4 00:00:10,400 --> 00:00:13,600 Speaker 1: along with essential market moving news. Find a Bloomberg Markets 5 00:00:13,600 --> 00:00:17,000 Speaker 1: podcast on Apple podcast or wherever you listen to podcasts, 6 00:00:17,000 --> 00:00:21,439 Speaker 1: and on Bloomberg dot Com. Allow me to digress for 7 00:00:21,600 --> 00:00:24,759 Speaker 1: just this tiny second and invoked the memory of Ken Pruitt, 8 00:00:24,800 --> 00:00:27,320 Speaker 1: who used to be a wonderful anchor here on Bloomberg Radio. 9 00:00:27,400 --> 00:00:29,880 Speaker 1: He used to distinguish between the modern economy and the 10 00:00:29,920 --> 00:00:32,840 Speaker 1: older economy by talking about things that you can pull 11 00:00:32,880 --> 00:00:34,919 Speaker 1: out of the ground in terms of what companies are 12 00:00:34,960 --> 00:00:37,960 Speaker 1: doing well. Sarah Ponzac, who joins me in studio now, 13 00:00:38,440 --> 00:00:41,479 Speaker 1: has a version of that idea in a fantastic story 14 00:00:41,520 --> 00:00:44,760 Speaker 1: today where she talks about the epic SMP five Raleigh 15 00:00:44,800 --> 00:00:48,640 Speaker 1: being powered by assets you can't see or touch. Sarah, 16 00:00:48,640 --> 00:00:50,800 Speaker 1: give us a little rundown of what goes on there. Well, 17 00:00:50,800 --> 00:00:53,320 Speaker 1: thank you very much, Bonnie. The idea behind this is 18 00:00:53,360 --> 00:00:57,400 Speaker 1: really that all year long, we constantly hear about tech 19 00:00:57,520 --> 00:01:02,160 Speaker 1: outperforming tech out performance. The reality is that COVID nineteen sure, 20 00:01:02,200 --> 00:01:04,520 Speaker 1: it has sped this up, but this has been a 21 00:01:04,560 --> 00:01:09,800 Speaker 1: trend for a very long time, and in speaking with professors, researchers, economists, 22 00:01:10,160 --> 00:01:12,280 Speaker 1: one thing that you can really trace this back to 23 00:01:12,600 --> 00:01:16,480 Speaker 1: is the difference between intangible assets and tangible assets. So 24 00:01:16,840 --> 00:01:20,480 Speaker 1: intangible assets being those things that you cannot see, you 25 00:01:20,560 --> 00:01:23,399 Speaker 1: cannot touch, think of them as a brand name like 26 00:01:23,480 --> 00:01:29,399 Speaker 1: the iPhone, for example, or data collected on people, algorithms, software, 27 00:01:29,959 --> 00:01:31,920 Speaker 1: even you can think about it in the sense of 28 00:01:31,959 --> 00:01:34,680 Speaker 1: a vaccine being created. All the R and D that 29 00:01:34,760 --> 00:01:38,000 Speaker 1: does go into that, it's all considered intangible and it's 30 00:01:38,040 --> 00:01:41,400 Speaker 1: not recorded on a company's balance sheet. So a on 31 00:01:41,440 --> 00:01:44,320 Speaker 1: impotent On institute. They put out a report back in ten. 32 00:01:44,360 --> 00:01:47,280 Speaker 1: It was recently cited by Bank of America by Carlyle. 33 00:01:47,360 --> 00:01:50,400 Speaker 1: This has really become a topic of conversation and what 34 00:01:50,480 --> 00:01:52,480 Speaker 1: they found. The way that they did this was they 35 00:01:52,520 --> 00:01:56,680 Speaker 1: took total SMP five market cap and they subtracted out 36 00:01:56,720 --> 00:02:00,760 Speaker 1: what's called tangible book value. Then they said every thing else, well, 37 00:02:01,080 --> 00:02:05,400 Speaker 1: that's due to intangible assets, which represented eighty four percent 38 00:02:05,920 --> 00:02:09,240 Speaker 1: of the SMP five dred. Now there are some discrepancies 39 00:02:09,240 --> 00:02:11,680 Speaker 1: here about how you can actually go about calculating this, 40 00:02:11,760 --> 00:02:15,440 Speaker 1: and it's really difficult because so touchy feely and accounting 41 00:02:15,440 --> 00:02:19,640 Speaker 1: measures really aren't that great surrounding this. But yes, you 42 00:02:19,680 --> 00:02:22,320 Speaker 1: have to take into account that what we see in 43 00:02:22,360 --> 00:02:25,160 Speaker 1: the length of market cap and that gap is also 44 00:02:25,280 --> 00:02:29,200 Speaker 1: due to projected earnings from both tangible intangible assets. But 45 00:02:29,280 --> 00:02:32,080 Speaker 1: the reality is that growth in intangible assets has just 46 00:02:32,160 --> 00:02:35,640 Speaker 1: been astronomical over the past two decades, over the past 47 00:02:35,680 --> 00:02:38,320 Speaker 1: decade in particular, and now sped up by COVID nineteen. 48 00:02:38,320 --> 00:02:40,560 Speaker 1: And that has extreme implications for the economy and the 49 00:02:40,639 --> 00:02:43,280 Speaker 1: labor market too. And of course how you value these 50 00:02:43,280 --> 00:02:45,720 Speaker 1: assets is what's important, or how investors value them. I 51 00:02:45,720 --> 00:02:47,920 Speaker 1: should say, some of these are just runs, some of them, 52 00:02:47,960 --> 00:02:50,799 Speaker 1: as you say, or you know, intellectual property and so on. 53 00:02:51,120 --> 00:02:54,639 Speaker 1: Some of them produced revenue, others absolutely don't. Right, There 54 00:02:54,639 --> 00:02:57,880 Speaker 1: are many implications of this. Often spoken about is what 55 00:02:57,960 --> 00:03:01,600 Speaker 1: this means for value investing. There is large question about 56 00:03:01,639 --> 00:03:03,960 Speaker 1: if this is the reason why value seems to be 57 00:03:04,080 --> 00:03:07,160 Speaker 1: quote unquote dead, why value hasn't been able to outperform. 58 00:03:07,240 --> 00:03:10,600 Speaker 1: Is it the reality that value investors are missing this 59 00:03:10,720 --> 00:03:14,360 Speaker 1: key input of intangible assets. Bank of America, for example, 60 00:03:14,400 --> 00:03:16,679 Speaker 1: how a recent report on this and they created their 61 00:03:16,760 --> 00:03:21,760 Speaker 1: value Intangibles basket where they incorporated intangibles into value investing 62 00:03:21,840 --> 00:03:24,360 Speaker 1: and they got much better returns. There's also a value 63 00:03:24,360 --> 00:03:27,400 Speaker 1: et F, for example, that holds Amazon, and the reason 64 00:03:27,440 --> 00:03:29,480 Speaker 1: that it holds Amazon is because they do take into 65 00:03:29,480 --> 00:03:33,320 Speaker 1: account intangible value. But when you think about the macro 66 00:03:33,560 --> 00:03:37,200 Speaker 1: economic effects of this and the macro economic implications when 67 00:03:37,200 --> 00:03:40,480 Speaker 1: you think about a company with a lot of intangible assets, 68 00:03:40,480 --> 00:03:42,800 Speaker 1: for example, a software company, there's a lot of R 69 00:03:42,880 --> 00:03:44,840 Speaker 1: and D research and development that goes into this. But 70 00:03:44,880 --> 00:03:47,400 Speaker 1: once the software is created, or once a vaccine is created, 71 00:03:47,400 --> 00:03:50,280 Speaker 1: for example, they have immense scale and you don't need 72 00:03:50,360 --> 00:03:54,880 Speaker 1: too many people working to keep that scale growing, to 73 00:03:55,560 --> 00:03:59,560 Speaker 1: keep software being issued too many different people to many 74 00:03:59,600 --> 00:04:02,280 Speaker 1: different companies for example. Same with a vaccine having it 75 00:04:02,320 --> 00:04:06,240 Speaker 1: administered around the world. So what people wonder and what 76 00:04:06,360 --> 00:04:10,080 Speaker 1: the proof has shown is that aside from the growth 77 00:04:10,240 --> 00:04:13,640 Speaker 1: of intangible assets alongside it, I should say we've also 78 00:04:13,680 --> 00:04:16,200 Speaker 1: seen slower labor market recoveries because if you think in 79 00:04:16,240 --> 00:04:19,400 Speaker 1: the olden days, if you think with oil wells and factories, 80 00:04:19,440 --> 00:04:22,480 Speaker 1: you needed a lot of people to really power these 81 00:04:22,520 --> 00:04:25,760 Speaker 1: tangible assets. Well, with intangible assets, the idea is that 82 00:04:25,800 --> 00:04:28,960 Speaker 1: you don't need that much growth and employment, you don't 83 00:04:28,960 --> 00:04:31,360 Speaker 1: need that many people. So people are starting to think 84 00:04:31,360 --> 00:04:33,359 Speaker 1: about and really wonder about what this means for the 85 00:04:33,400 --> 00:04:37,520 Speaker 1: future of the economy. One interesting area is brand names, 86 00:04:37,520 --> 00:04:39,599 Speaker 1: as you said, And yesterday I was speaking with somebody 87 00:04:39,640 --> 00:04:41,839 Speaker 1: who owns many Reads or who's the CEO of a 88 00:04:41,920 --> 00:04:45,240 Speaker 1: red company, and he talked about how they've undone some 89 00:04:46,080 --> 00:04:48,880 Speaker 1: deals they had with Marriott or I h S for example, 90 00:04:48,960 --> 00:04:50,720 Speaker 1: and you have to wonder, you know, he talked about 91 00:04:50,720 --> 00:04:53,000 Speaker 1: a hundred fifty hotel brands that they used to work 92 00:04:53,040 --> 00:04:55,280 Speaker 1: with and now they're really consolidating that and going with 93 00:04:55,320 --> 00:04:58,080 Speaker 1: their own hotel brands like Sanesta. You have to wonder, 94 00:04:58,360 --> 00:05:01,360 Speaker 1: will some of these brands just go away or decrease 95 00:05:01,360 --> 00:05:03,960 Speaker 1: significant dy and value. Well, you have to wonder that. 96 00:05:04,040 --> 00:05:06,320 Speaker 1: And when you think about a brand, you have to 97 00:05:06,360 --> 00:05:11,080 Speaker 1: think about the emotions that comes with it, also just 98 00:05:11,200 --> 00:05:14,800 Speaker 1: how recognizable it is to a majority of people. When 99 00:05:14,839 --> 00:05:17,800 Speaker 1: I was working on this story, one example that came up, 100 00:05:17,839 --> 00:05:20,440 Speaker 1: for example, was the likes of band aid. For example, 101 00:05:20,720 --> 00:05:22,800 Speaker 1: band aid is a brand, but when we talk about 102 00:05:22,880 --> 00:05:25,040 Speaker 1: using band aids, I mean, I'll go ahead and say 103 00:05:25,080 --> 00:05:27,560 Speaker 1: the name you talk about using band aids, so that 104 00:05:27,680 --> 00:05:31,120 Speaker 1: is such value that is added to the company that 105 00:05:31,200 --> 00:05:34,679 Speaker 1: creates band aid. For example, you think about the likes 106 00:05:34,839 --> 00:05:37,480 Speaker 1: of Apple and It's iPhone. When people talk about phones, 107 00:05:37,520 --> 00:05:40,040 Speaker 1: a lot of people will just off handly use iPhone 108 00:05:40,080 --> 00:05:43,320 Speaker 1: because such a large proportion of the population uses it. 109 00:05:43,440 --> 00:05:45,799 Speaker 1: So when you think about the value of a company, 110 00:05:45,880 --> 00:05:49,920 Speaker 1: brand names are so important and the ideas the emotion 111 00:05:50,000 --> 00:05:51,719 Speaker 1: that comes with it. Another one that comes to mind 112 00:05:51,760 --> 00:05:54,800 Speaker 1: is Disney. Disney has such a great brand value that 113 00:05:54,839 --> 00:05:56,760 Speaker 1: comes with it. Even though it's a company that does 114 00:05:56,839 --> 00:05:59,719 Speaker 1: have a high amount of tangible assets, you also have 115 00:05:59,760 --> 00:06:03,040 Speaker 1: to think about the brand. To Sarah, there's so much 116 00:06:03,040 --> 00:06:04,680 Speaker 1: more we can talk about in this story, but we 117 00:06:04,680 --> 00:06:06,760 Speaker 1: do have to leave it there for now. Sarah Ponzac 118 00:06:07,040 --> 00:06:09,919 Speaker 1: is our Cross Asset reporter here at Bloomberg. Again, if 119 00:06:09,960 --> 00:06:12,320 Speaker 1: you have a chance to have a read through this story, 120 00:06:12,360 --> 00:06:15,679 Speaker 1: it really is just a fun story, but also extraordinary, 121 00:06:16,000 --> 00:06:20,840 Speaker 1: lust lustrative, and also educational epic SMB five values powered 122 00:06:20,839 --> 00:06:25,000 Speaker 1: by assets you can't see or touch. That Sarah Ponzac, 123 00:06:27,320 --> 00:06:30,159 Speaker 1: time for a conversation now about monopoly, and I'm not 124 00:06:30,200 --> 00:06:32,720 Speaker 1: talking the board game. I'm talking Google which our next 125 00:06:32,720 --> 00:06:36,600 Speaker 1: guest says should learn from Microsoft's a tough lesson. Jon 126 00:06:36,680 --> 00:06:40,039 Speaker 1: Oh Sarah joins us now Bloomberg opinion columnist. What was 127 00:06:40,080 --> 00:06:43,440 Speaker 1: the tough lesson that Microsoft learned, Joe that Google is 128 00:06:43,480 --> 00:06:47,760 Speaker 1: about to learn? According to you, you fight the federal 129 00:06:47,760 --> 00:06:53,240 Speaker 1: government at your peril. Uh, let's let's start there. Um. 130 00:06:53,279 --> 00:06:57,080 Speaker 1: You know the the when you look at the complaint 131 00:06:57,120 --> 00:07:01,640 Speaker 1: that the Dust's Department filed against Google, it is uncannily 132 00:07:01,839 --> 00:07:06,440 Speaker 1: similar to the complaint the Justice Department file twenty two 133 00:07:06,560 --> 00:07:11,120 Speaker 1: years ago against Microsoft. Microsoft was accused of using it, 134 00:07:11,880 --> 00:07:17,400 Speaker 1: you know, operating system monopoly to squash um a competitor, 135 00:07:17,600 --> 00:07:21,160 Speaker 1: Netscape that had a browser that was competing with with 136 00:07:21,280 --> 00:07:26,440 Speaker 1: the Microsoft browser Internet Explorer. Um Uh. Google is being 137 00:07:26,480 --> 00:07:33,200 Speaker 1: accused of basically, um uh, going to going to Apple 138 00:07:33,320 --> 00:07:35,680 Speaker 1: and other companies and basically saying, we want to be 139 00:07:35,840 --> 00:07:38,560 Speaker 1: the pre we want to be the defalse search engine. 140 00:07:38,560 --> 00:07:41,040 Speaker 1: We'll pay you to put our search engine you know, 141 00:07:41,360 --> 00:07:45,120 Speaker 1: embedded in your in your devices and keep everybody else out. 142 00:07:45,600 --> 00:07:49,920 Speaker 1: It's very very similar, and you know, Microsoft lost that case, 143 00:07:50,240 --> 00:07:54,880 Speaker 1: and even though antitrust is um gotten a little more 144 00:07:54,920 --> 00:07:58,560 Speaker 1: las fair since then. I think Google's in a heap 145 00:07:58,600 --> 00:08:02,080 Speaker 1: of trouble. Well, there have been twenty two years in 146 00:08:02,120 --> 00:08:05,440 Speaker 1: the meantime. Is there anything in case slow or anything 147 00:08:05,480 --> 00:08:07,600 Speaker 1: in precedent that Google might be able to learn from 148 00:08:07,760 --> 00:08:11,840 Speaker 1: and use to its advantage. Well, the main thing that 149 00:08:11,920 --> 00:08:15,520 Speaker 1: they will argue about is how to define the market. 150 00:08:16,000 --> 00:08:19,239 Speaker 1: So if the if the market is defined purely as 151 00:08:19,280 --> 00:08:23,200 Speaker 1: the search engine market, then I think Google's going to 152 00:08:23,320 --> 00:08:26,360 Speaker 1: have real problems defending its position. But if they can 153 00:08:26,400 --> 00:08:30,600 Speaker 1: persuade the judge to make the market um, you know, 154 00:08:30,760 --> 00:08:36,120 Speaker 1: Internet platforms or something that's broader and wider than simply search, 155 00:08:36,679 --> 00:08:38,480 Speaker 1: then I think they've got a pretty good shot. I 156 00:08:38,480 --> 00:08:41,040 Speaker 1: think a lot. So it's a it's as technical term, 157 00:08:41,040 --> 00:08:44,480 Speaker 1: but it's super important in the antitrust is how do 158 00:08:44,520 --> 00:08:47,800 Speaker 1: you define the market? Uh? And if you define it 159 00:08:47,920 --> 00:08:50,040 Speaker 1: one way, it can you know, then you're a monopolist. 160 00:08:50,120 --> 00:08:51,920 Speaker 1: If you define it another way, then maybe you're not. 161 00:08:53,200 --> 00:08:57,480 Speaker 1: They will have teams and teams of lawyers, Joe, I 162 00:08:57,520 --> 00:09:00,480 Speaker 1: mean how will this play out? I mean will it 163 00:09:00,520 --> 00:09:02,560 Speaker 1: be a public spectacle? Will we be able to see 164 00:09:02,559 --> 00:09:06,000 Speaker 1: a lot of drama, a lot of theater? Um? Well, 165 00:09:06,080 --> 00:09:10,360 Speaker 1: in the past, Google has uh wound up usually settling 166 00:09:11,120 --> 00:09:14,599 Speaker 1: Uh with gup various governments or in Europe paid to 167 00:09:14,720 --> 00:09:17,720 Speaker 1: paid large fines. So the real question is will it 168 00:09:17,800 --> 00:09:21,920 Speaker 1: get to the trial stage. If it does get to 169 00:09:21,960 --> 00:09:25,040 Speaker 1: the trial stage, I think it's quite likely that it 170 00:09:25,120 --> 00:09:28,920 Speaker 1: will be, um, you know, one of those uh high 171 00:09:28,960 --> 00:09:32,880 Speaker 1: profile rock and roll you know trials with lots of 172 00:09:32,920 --> 00:09:37,360 Speaker 1: fireworks and you know, inflammatory emails and you know, so 173 00:09:37,440 --> 00:09:40,400 Speaker 1: on and so forth. Um. I'm sure one thing that 174 00:09:40,480 --> 00:09:43,760 Speaker 1: they learned from the trial is uh, not to act 175 00:09:43,760 --> 00:09:46,320 Speaker 1: the way Bill Gates acted during his deposition, which was 176 00:09:46,360 --> 00:09:51,680 Speaker 1: devastating for Microsoft. As you were called, he was his 177 00:09:51,679 --> 00:09:57,720 Speaker 1: his answers were he he barely seemed to know you know, 178 00:09:57,800 --> 00:10:01,199 Speaker 1: what the words meant, and when that was played in 179 00:10:01,240 --> 00:10:05,920 Speaker 1: the courthouse, that did not help Microsoft at all. Joe, 180 00:10:06,480 --> 00:10:08,840 Speaker 1: you know, Google is going to face this first, but 181 00:10:09,120 --> 00:10:11,360 Speaker 1: it's clear that some of the other major tech companies 182 00:10:11,360 --> 00:10:13,160 Speaker 1: are going to face this as well. Is there anything 183 00:10:13,240 --> 00:10:16,640 Speaker 1: to suggest that one company might prevail over some of 184 00:10:16,720 --> 00:10:19,439 Speaker 1: the others, or that that companies will take a different 185 00:10:19,480 --> 00:10:22,800 Speaker 1: tech when dealing with us, Well, each company is going 186 00:10:22,880 --> 00:10:24,600 Speaker 1: to have a different issue, you know, and that's what 187 00:10:24,679 --> 00:10:28,400 Speaker 1: makes this so hard. So, you know, Facebook, you know, 188 00:10:28,559 --> 00:10:33,240 Speaker 1: is the is the eight hundred pound gorilla UH in 189 00:10:33,320 --> 00:10:36,520 Speaker 1: social media. UM, and if the government went after them, 190 00:10:36,559 --> 00:10:38,920 Speaker 1: they would probably try to break them up and and 191 00:10:38,920 --> 00:10:42,600 Speaker 1: and you know, UH separate them from Instagram and What's App, 192 00:10:42,640 --> 00:10:47,000 Speaker 1: which which they both own. Amazon is the platform company 193 00:10:47,080 --> 00:10:51,640 Speaker 1: that is being accused of using data from UH it's 194 00:10:51,920 --> 00:10:55,640 Speaker 1: its own customers, companies that sell on Amazon to make 195 00:10:55,679 --> 00:10:59,240 Speaker 1: their own products to compete with these other companies. And 196 00:10:59,520 --> 00:11:02,800 Speaker 1: UH so that's what they'll be suit over UM an Apple. 197 00:11:03,040 --> 00:11:05,680 Speaker 1: If the government goes after them, it'll be because of 198 00:11:06,440 --> 00:11:10,040 Speaker 1: the way they enforce the rules and and handle their 199 00:11:10,080 --> 00:11:14,079 Speaker 1: own UM the app store, the propriety of the app store. 200 00:11:14,360 --> 00:11:16,679 Speaker 1: So each case is going to be different. They're all 201 00:11:16,720 --> 00:11:20,480 Speaker 1: antitrust cases, but but the the emphasis in each case 202 00:11:20,600 --> 00:11:23,000 Speaker 1: is going to be quite different. And it's really hard 203 00:11:23,040 --> 00:11:26,520 Speaker 1: to know at this point which of the cases are 204 00:11:26,520 --> 00:11:28,880 Speaker 1: the stronger for the Justice Department and which are ones 205 00:11:28,920 --> 00:11:31,320 Speaker 1: are the weaker. I think the other thing that's gonna 206 00:11:31,320 --> 00:11:35,440 Speaker 1: happen though, don't forget, there's also Congress, and so if 207 00:11:35,559 --> 00:11:39,480 Speaker 1: the Democrats take the Senate and UM the White House, 208 00:11:40,520 --> 00:11:44,200 Speaker 1: you're almost surely going to see laws being written and 209 00:11:44,320 --> 00:11:49,360 Speaker 1: passed that UM that outlaws some of the practices these 210 00:11:49,360 --> 00:11:52,360 Speaker 1: tech companies have been doing. UH, so that there's no 211 00:11:52,559 --> 00:11:55,960 Speaker 1: there's no ambiguity about about whether they violate the law 212 00:11:56,040 --> 00:11:57,920 Speaker 1: or not. They're just gonna say this is against the law. 213 00:11:58,000 --> 00:12:00,720 Speaker 1: You cannot do this Amazon, or you cannot do this Facebook. 214 00:12:01,520 --> 00:12:04,880 Speaker 1: It's so fascinating. I'm also curious as to whether a 215 00:12:04,960 --> 00:12:07,920 Speaker 1: change in administration should we get one, and that's absolutely 216 00:12:07,960 --> 00:12:10,800 Speaker 1: not not determined yet. But if we get one, doesn't 217 00:12:10,920 --> 00:12:13,160 Speaker 1: make a difference in this what's going to be a 218 00:12:13,240 --> 00:12:17,480 Speaker 1: year's one case. I don't think it does. UM. This 219 00:12:17,480 --> 00:12:21,400 Speaker 1: this case was clearly put together by the UM career 220 00:12:21,400 --> 00:12:25,400 Speaker 1: professionals at the Justice Department. They're not going to go anywhere. UM. 221 00:12:25,440 --> 00:12:28,720 Speaker 1: The Democrats, as I wrote in another column recently, are 222 00:12:28,800 --> 00:12:33,440 Speaker 1: really UM geared up to go after these big tech 223 00:12:33,480 --> 00:12:38,920 Speaker 1: companies on antitrust grounds. And UM the idea that Biden 224 00:12:38,960 --> 00:12:43,559 Speaker 1: administration would back away from this lawsuit is almost inconceivable. 225 00:12:43,840 --> 00:12:48,679 Speaker 1: If anything, they will add additional charges that are not 226 00:12:48,920 --> 00:12:51,600 Speaker 1: currently contained in in the in the in the in 227 00:12:51,640 --> 00:12:55,520 Speaker 1: the complaint right now. Yeah, I mean, it's really interesting. 228 00:12:56,160 --> 00:12:58,400 Speaker 1: There's also the question of how the do o J 229 00:12:58,760 --> 00:13:00,640 Speaker 1: is going to be staffed up and so on, Joe. 230 00:13:00,640 --> 00:13:02,720 Speaker 1: But you think these things just carry on sort of 231 00:13:03,080 --> 00:13:08,840 Speaker 1: seamlessly transition or no, well, seamlessly it is probably overstatement. 232 00:13:09,320 --> 00:13:11,800 Speaker 1: I mean, don't forget don't forget a T and T 233 00:13:12,080 --> 00:13:15,000 Speaker 1: T and T deal with time. Warner was just about 234 00:13:15,080 --> 00:13:18,560 Speaker 1: locked up when making del Rayhan became the antitrust chief 235 00:13:18,559 --> 00:13:23,720 Speaker 1: of the Juice Department under under under President Trump, and 236 00:13:23,760 --> 00:13:26,800 Speaker 1: he immediately reversed course on it with much of the 237 00:13:26,880 --> 00:13:30,160 Speaker 1: dismay of the career professionals. But in this particular case, 238 00:13:30,280 --> 00:13:33,920 Speaker 1: I think the career professionals and whoever hit their superiors 239 00:13:33,920 --> 00:13:35,679 Speaker 1: turn out to be are going to be going to 240 00:13:35,760 --> 00:13:39,679 Speaker 1: be aligned on this case. Joe. It's always so fascinating 241 00:13:39,720 --> 00:13:41,800 Speaker 1: to speak to you just on a stufford note, before 242 00:13:41,800 --> 00:13:44,800 Speaker 1: we let you can ask you what you think it's 243 00:13:44,800 --> 00:13:49,280 Speaker 1: going to happen tomorrow night, debate night. You can ask me. 244 00:13:49,320 --> 00:13:53,640 Speaker 1: But I don't know that's a fair enough answer. It's uh, 245 00:13:53,800 --> 00:13:55,720 Speaker 1: it's not fair to put an opinion columnist on the 246 00:13:55,720 --> 00:13:58,280 Speaker 1: spot like that, Joe. Thank you. Jonah Sarah is a 247 00:13:58,320 --> 00:14:01,920 Speaker 1: Boombrig opinion columnists covering business. We should say, and of 248 00:14:01,920 --> 00:14:03,959 Speaker 1: course I do check out if you haven't heard it. 249 00:14:04,520 --> 00:14:08,000 Speaker 1: His project the Bloomberg Wandere Project, the Shrink next Door 250 00:14:08,400 --> 00:14:11,640 Speaker 1: for all sorts of prizes, and really just a fascinating 251 00:14:11,760 --> 00:14:14,640 Speaker 1: liston as well. So Joe, thanks for joining today's column. 252 00:14:14,840 --> 00:14:18,400 Speaker 1: Is that Google should learn from Microsoft's tough lesson and 253 00:14:18,440 --> 00:14:23,200 Speaker 1: well worth a read for anybody out there. Let's get 254 00:14:23,200 --> 00:14:26,000 Speaker 1: back to the markets now. A very interesting conversation coming 255 00:14:26,080 --> 00:14:30,040 Speaker 1: up with Anderson Capital Management. Peter Anderson, who is located 256 00:14:30,080 --> 00:14:33,480 Speaker 1: in Boston and manage is something called the weather marka 257 00:14:33,560 --> 00:14:37,680 Speaker 1: fun It's a credit driven, concentrated, low turnover stock portfolio 258 00:14:38,040 --> 00:14:43,280 Speaker 1: that apparently incorporates a truly different esoteric stock selection process. 259 00:14:43,800 --> 00:14:46,240 Speaker 1: So Peter, welcome and give us just a little hint 260 00:14:46,240 --> 00:14:50,080 Speaker 1: of what this esoteric stock selection process might be. Well, 261 00:14:50,120 --> 00:14:52,920 Speaker 1: good morning, Bonnie. Yes, so I come from a fixed 262 00:14:52,960 --> 00:14:56,800 Speaker 1: income background and inequity background, and not many people have 263 00:14:56,920 --> 00:15:00,240 Speaker 1: that combination. Usually you stay in one swim lane for 264 00:15:00,320 --> 00:15:03,040 Speaker 1: your profession. But I switched over to equities and I 265 00:15:03,040 --> 00:15:07,200 Speaker 1: found it very convenient and helpful, frankly, to borrow from 266 00:15:07,240 --> 00:15:10,880 Speaker 1: the fixed income marketplace the different tools they use and 267 00:15:10,920 --> 00:15:13,720 Speaker 1: apply that to equity analysis. So what I have is 268 00:15:13,760 --> 00:15:17,000 Speaker 1: a current portfolio or fifteen stocks, but they are derived 269 00:15:17,080 --> 00:15:20,920 Speaker 1: mainly by looking at dislocations between how the bond market 270 00:15:21,000 --> 00:15:23,360 Speaker 1: might have an opinion on a company versus how an 271 00:15:23,400 --> 00:15:26,360 Speaker 1: equity market would have an opinion on the same company. 272 00:15:27,720 --> 00:15:30,280 Speaker 1: So what does it led you to put into your 273 00:15:30,320 --> 00:15:34,800 Speaker 1: portfolio in the last six months? And have you changed much? Uh? 274 00:15:34,840 --> 00:15:38,400 Speaker 1: You know, my turnover is very low relatively speaking. You know, 275 00:15:38,440 --> 00:15:40,720 Speaker 1: there are a lot of competitors out there. Mutual funds 276 00:15:40,800 --> 00:15:43,280 Speaker 1: would have over ad percent turnover, but mine is only 277 00:15:43,320 --> 00:15:47,400 Speaker 1: about twenty five. So that's an indirect way of saying 278 00:15:47,440 --> 00:15:51,200 Speaker 1: that my turn my new stock selection is pretty slow. 279 00:15:51,320 --> 00:15:53,880 Speaker 1: At most. Ill pick maybe one or two stocks a year, 280 00:15:54,440 --> 00:15:57,960 Speaker 1: and uh, I hoping that's a sign of my conviction 281 00:15:58,200 --> 00:16:01,560 Speaker 1: on the holdings that I currently have, of uh in 282 00:16:01,680 --> 00:16:07,040 Speaker 1: terms of my outlook for their market appreciation. Okay, how 283 00:16:07,280 --> 00:16:09,720 Speaker 1: specific can you get when you talk to us about 284 00:16:09,760 --> 00:16:12,200 Speaker 1: what's actually in your portfolio? Because last year, for example, 285 00:16:13,080 --> 00:16:17,280 Speaker 1: return on an eighteen stock portfolio. Yes, yes, and I've 286 00:16:17,600 --> 00:16:19,360 Speaker 1: delighted to talk to you about that, and I wanted 287 00:16:19,400 --> 00:16:22,120 Speaker 1: to also tie that in to you know, what my 288 00:16:22,240 --> 00:16:25,080 Speaker 1: current assessment is of where we are. I think it's 289 00:16:25,160 --> 00:16:28,920 Speaker 1: extremely difficult right now. You know, COVID has just kind 290 00:16:28,960 --> 00:16:32,440 Speaker 1: of dropped a bomb on all the standard metrics that 291 00:16:32,600 --> 00:16:35,880 Speaker 1: either economists use or equity analysts used. I think they're 292 00:16:35,880 --> 00:16:39,280 Speaker 1: having a very very hard time formulating, oh, what is 293 00:16:39,280 --> 00:16:41,480 Speaker 1: going to happen, say with the next three months. So 294 00:16:41,560 --> 00:16:44,360 Speaker 1: I don't take an approach like that. This approach takes 295 00:16:44,400 --> 00:16:48,200 Speaker 1: a longer view, and I tried to simplify UH supply 296 00:16:48,320 --> 00:16:50,880 Speaker 1: demand and try to get a clearer sense of what 297 00:16:51,040 --> 00:16:55,760 Speaker 1: stocks out there will endure and indeed appreciate regardless of 298 00:16:55,840 --> 00:16:59,400 Speaker 1: what happens in the White House, how long the virus lasts, 299 00:16:59,480 --> 00:17:02,360 Speaker 1: or whether an we have our hopes for the vaccine 300 00:17:02,560 --> 00:17:06,159 Speaker 1: or dash. So with that in mind, some enduring themes 301 00:17:06,200 --> 00:17:08,480 Speaker 1: are believe it or not, pet care. That's the most 302 00:17:08,520 --> 00:17:11,840 Speaker 1: recent editions I've had in the portfolio, and I have 303 00:17:11,920 --> 00:17:14,600 Speaker 1: a theme of pet care sub theme if you will 304 00:17:14,640 --> 00:17:17,440 Speaker 1: have three stocks in there, and I can explicitly tell 305 00:17:17,440 --> 00:17:20,880 Speaker 1: you what they are, the Trupanion Fresh pet in Zoetics. 306 00:17:20,920 --> 00:17:25,400 Speaker 1: Each one has a very specific place in the pet 307 00:17:25,440 --> 00:17:28,240 Speaker 1: care of this nation. At least we own over a 308 00:17:28,320 --> 00:17:31,440 Speaker 1: hundred million cats and dogs out there, and I've write 309 00:17:31,520 --> 00:17:34,679 Speaker 1: reason to that no matter what happens, we treat our 310 00:17:34,720 --> 00:17:40,360 Speaker 1: pets equal to and to a family members in a family. 311 00:17:40,880 --> 00:17:45,240 Speaker 1: So Trupanion is the only publicly traded stock that provides 312 00:17:45,320 --> 00:17:48,840 Speaker 1: healthcare insurance for pets, and their market penetrations is only 313 00:17:48,920 --> 00:17:53,120 Speaker 1: one percent of the entire hundred million animals out there. 314 00:17:53,200 --> 00:17:56,080 Speaker 1: So just think of that. If it doubles its market share, 315 00:17:56,119 --> 00:17:59,320 Speaker 1: it's only up two percent in market share, but it 316 00:17:59,440 --> 00:18:03,800 Speaker 1: certainly double its revenues in fresh pet is gourmet food 317 00:18:04,000 --> 00:18:09,600 Speaker 1: for pets and zoetts. Provides the medication, the prescription medication 318 00:18:09,680 --> 00:18:14,159 Speaker 1: that once you bring your pet to UH doctor veterinarian, 319 00:18:14,280 --> 00:18:19,280 Speaker 1: you will usually get UH prescription for medication and most 320 00:18:19,320 --> 00:18:21,199 Speaker 1: likely the way if this is a manufacturer of that. 321 00:18:21,359 --> 00:18:25,440 Speaker 1: So this is a long term perspective. Uh, from now 322 00:18:25,600 --> 00:18:28,000 Speaker 1: through the end of the year. I think that there 323 00:18:28,000 --> 00:18:31,720 Speaker 1: will be incredible volatility, but who can predict who's going 324 00:18:31,760 --> 00:18:35,080 Speaker 1: to win, when the virus will end, when the vaccines 325 00:18:35,119 --> 00:18:37,080 Speaker 1: will come out. But I think these socks have an 326 00:18:37,160 --> 00:18:41,440 Speaker 1: enduring quality. Are any of your holdings at all dependent 327 00:18:41,520 --> 00:18:45,080 Speaker 1: on more stimulus coming? You know, I try to stay 328 00:18:45,080 --> 00:18:47,479 Speaker 1: away from me because when you think about it, pets 329 00:18:47,640 --> 00:18:50,840 Speaker 1: are definitely, you know, something that costs some money. You know, 330 00:18:50,880 --> 00:18:53,600 Speaker 1: you just said it yourself, right, So you're essentially trying 331 00:18:53,640 --> 00:18:56,600 Speaker 1: to gather the extra pennies that people have, and in 332 00:18:56,640 --> 00:18:59,480 Speaker 1: this case it's through their pets. But a lot of 333 00:18:59,480 --> 00:19:02,639 Speaker 1: people who have pets that you know, don't get extra stimulus, 334 00:19:02,640 --> 00:19:04,600 Speaker 1: will not be able to get their pet that extra 335 00:19:04,640 --> 00:19:08,639 Speaker 1: operation or that medicine. Yes, that's a possibility, but I 336 00:19:08,640 --> 00:19:11,720 Speaker 1: would also say that if that's the case, it's almost 337 00:19:11,800 --> 00:19:14,760 Speaker 1: like saying you wouldn't be able to provide for your 338 00:19:14,800 --> 00:19:17,680 Speaker 1: own family member. So I think there is a strong 339 00:19:18,240 --> 00:19:22,520 Speaker 1: commitments and I would say almost an inelastic demand for 340 00:19:22,720 --> 00:19:26,720 Speaker 1: pet care in this country, at least the way um 341 00:19:26,800 --> 00:19:31,240 Speaker 1: the demographics read and all the latest polling of pet 342 00:19:31,480 --> 00:19:35,159 Speaker 1: um owners say that this is top on their list 343 00:19:35,640 --> 00:19:37,760 Speaker 1: next to a family member to spend. So I think 344 00:19:37,800 --> 00:19:40,600 Speaker 1: you'd really have to erode. There's a lot of inelastic 345 00:19:40,640 --> 00:19:43,760 Speaker 1: demand elements out there that I try to avoid, uh. 346 00:19:43,800 --> 00:19:46,280 Speaker 1: And I do think that these stocks, for instance, will 347 00:19:46,320 --> 00:19:50,960 Speaker 1: be unaffected by a stimulus as some other sectors, such 348 00:19:51,000 --> 00:19:53,720 Speaker 1: as data security and data storage. Those are other to 349 00:19:53,720 --> 00:19:56,119 Speaker 1: two other themes that I play in the portfolio, but 350 00:19:56,240 --> 00:20:00,280 Speaker 1: I think also have enduring qualities. Interesting. Alright, Peter's thank 351 00:20:00,359 --> 00:20:03,520 Speaker 1: you some wonderful things to think about. Their Peter Anderson, 352 00:20:03,520 --> 00:20:07,119 Speaker 1: as founder of Anderson and Capital Management, talking to us 353 00:20:07,119 --> 00:20:10,520 Speaker 1: there about some pet care stocks and then also data storage, 354 00:20:10,720 --> 00:20:13,080 Speaker 1: and of course we know storage of all kinds has 355 00:20:13,119 --> 00:20:16,600 Speaker 1: been pretty popular in this pandemic, a lot of people transferring. 356 00:20:16,640 --> 00:20:21,920 Speaker 1: There's the literal physical buildings into physical storage in inner 357 00:20:21,920 --> 00:20:23,920 Speaker 1: cities as well. So that's another theme that we can 358 00:20:24,240 --> 00:20:29,200 Speaker 1: look at another day. Let's get now to our next 359 00:20:29,240 --> 00:20:31,640 Speaker 1: guest who keeps an eye on emerging markets, but also 360 00:20:31,680 --> 00:20:34,600 Speaker 1: so much more than that. Damian Sasaur is just an 361 00:20:34,640 --> 00:20:37,240 Speaker 1: absolute genius when it comes to watching the markets. He's 362 00:20:37,280 --> 00:20:41,080 Speaker 1: chief Emerging markets credit strategist for Bloomberg Intelligence. But I 363 00:20:41,119 --> 00:20:42,639 Speaker 1: know that in his spare time he does a lot 364 00:20:42,680 --> 00:20:45,960 Speaker 1: more than that, such as looking at frontier markets. And Damian, 365 00:20:46,000 --> 00:20:48,560 Speaker 1: if you don't mind me jumping you with the question, 366 00:20:49,359 --> 00:20:52,239 Speaker 1: we haven't really spent any time on Nigeria or on 367 00:20:52,280 --> 00:20:54,920 Speaker 1: any of the problems that have been having that we've 368 00:20:54,960 --> 00:20:58,040 Speaker 1: been seeing on the periphery. Have you looked at any 369 00:20:58,040 --> 00:21:00,280 Speaker 1: of the frontier markets that are that are suffering right 370 00:21:00,320 --> 00:21:05,160 Speaker 1: now and where is experiencing the most trouble. So it's 371 00:21:05,160 --> 00:21:07,040 Speaker 1: interesting actually that you bring that up, Bonnie. And by 372 00:21:07,040 --> 00:21:09,479 Speaker 1: the way, I'm blushing, thank you for the introduction. So 373 00:21:09,600 --> 00:21:11,360 Speaker 1: you know, the reality is in Nigeria. You know, you've 374 00:21:11,400 --> 00:21:13,720 Speaker 1: had some protests. Nigeria is kind of a closed market. 375 00:21:13,720 --> 00:21:16,520 Speaker 1: There's a big dislocation between the niro, which is its 376 00:21:16,520 --> 00:21:19,600 Speaker 1: local currency, and and the black market rates. So you know, 377 00:21:19,720 --> 00:21:22,280 Speaker 1: I mean, you know, it's not really an investors market 378 00:21:22,440 --> 00:21:26,040 Speaker 1: from a US dollar investor perspective, but you can get 379 00:21:26,080 --> 00:21:28,600 Speaker 1: some really high carrying a lot of frontier markets for 380 00:21:28,600 --> 00:21:31,440 Speaker 1: for example, Egypt and Uruguay and Ghana. You know, you've 381 00:21:31,440 --> 00:21:33,760 Speaker 1: got double digit yields and all of those economies, um, 382 00:21:33,800 --> 00:21:35,960 Speaker 1: and you know, you know you can get that, albeit 383 00:21:36,280 --> 00:21:38,400 Speaker 1: with increased currency risk. So I think that's the real 384 00:21:38,480 --> 00:21:40,879 Speaker 1: risk here. But my goodness, the moving the dollar is 385 00:21:40,880 --> 00:21:43,760 Speaker 1: definitely catching people's attentions. And you know, I can see 386 00:21:43,760 --> 00:21:45,199 Speaker 1: a lot of people putting more money to work in 387 00:21:45,200 --> 00:21:47,760 Speaker 1: the front along the frontier and emerging markets. Right, So 388 00:21:47,960 --> 00:21:50,600 Speaker 1: net net is it better for these markets when that 389 00:21:50,640 --> 00:21:53,120 Speaker 1: happens or is it is it a disaster? Do they 390 00:21:53,119 --> 00:21:55,320 Speaker 1: need to run to the I M F and runder 391 00:21:55,320 --> 00:21:58,400 Speaker 1: any program that that will host them. Well, it certainly depends, 392 00:21:58,480 --> 00:22:00,200 Speaker 1: right I mean, certainly the I m F is there 393 00:22:00,320 --> 00:22:03,000 Speaker 1: for you know, real troubled economies. I mean, we saw 394 00:22:03,080 --> 00:22:05,960 Speaker 1: what they're doing with with in places like Argentina, Ukraine, 395 00:22:06,040 --> 00:22:08,280 Speaker 1: you know, even Ecuador. But you know, when you're looking 396 00:22:08,280 --> 00:22:10,119 Speaker 1: at the front here, you know, and and some of 397 00:22:10,119 --> 00:22:12,560 Speaker 1: the markets I just mentioned, I wouldn't say stable is 398 00:22:12,600 --> 00:22:15,800 Speaker 1: the right word to to characterize them, but certainly more 399 00:22:15,840 --> 00:22:18,359 Speaker 1: stable than than than the former. So you know, Egypt 400 00:22:18,440 --> 00:22:20,480 Speaker 1: is one place where you can carry really really well 401 00:22:20,520 --> 00:22:22,800 Speaker 1: in the short end. You can get double digit yields there. 402 00:22:23,119 --> 00:22:25,840 Speaker 1: But again, you know, those economies are subject to real 403 00:22:25,960 --> 00:22:28,840 Speaker 1: volatile moves in their local currencies relative to the dollars. 404 00:22:28,920 --> 00:22:30,840 Speaker 1: So you know, for example, if we see you know, 405 00:22:31,560 --> 00:22:33,520 Speaker 1: a Trump victory and the dollar rallies off the back 406 00:22:33,560 --> 00:22:35,560 Speaker 1: of that, all bets are off, right, So you know, 407 00:22:35,600 --> 00:22:38,160 Speaker 1: you have to be very selective, and most people use 408 00:22:38,240 --> 00:22:41,640 Speaker 1: that exposure as sort of a satellite within their core 409 00:22:41,680 --> 00:22:44,119 Speaker 1: emerging market portfolio. So it's really more of a terro 410 00:22:44,200 --> 00:22:46,399 Speaker 1: risk kedge or like what I like to call a 411 00:22:46,400 --> 00:22:50,120 Speaker 1: free call option. We like to call that a free 412 00:22:50,119 --> 00:22:52,720 Speaker 1: call option as well. Of course, Damian talks us about 413 00:22:52,800 --> 00:22:54,760 Speaker 1: the some of the things that did get resolved this 414 00:22:54,800 --> 00:22:58,000 Speaker 1: week in terms of some of this Latin American countries. 415 00:22:58,000 --> 00:23:01,560 Speaker 1: In the South American countries, we saw Argentina, for example, 416 00:23:01,640 --> 00:23:05,359 Speaker 1: take a big step. Bolivia too. Yeah, no, absolutely, So 417 00:23:05,440 --> 00:23:08,800 Speaker 1: you know Bolivia is obviously pivoted more towards the socialist bent. Um. 418 00:23:08,840 --> 00:23:11,040 Speaker 1: You know, look, what's interesting is, you know, if you 419 00:23:11,040 --> 00:23:13,040 Speaker 1: just want to just kind of think about Latin America, 420 00:23:13,400 --> 00:23:16,560 Speaker 1: Latin America is really underperformed. Um. I'm talking local Latin 421 00:23:16,640 --> 00:23:20,000 Speaker 1: America effects relative to the broader emerging market universe. And 422 00:23:20,280 --> 00:23:22,080 Speaker 1: you know, if we do see you know, the US 423 00:23:22,119 --> 00:23:24,200 Speaker 1: E pretty market reopening. You know, if we do see 424 00:23:24,200 --> 00:23:26,160 Speaker 1: a steeper U S treasury yield curve, if we see 425 00:23:26,200 --> 00:23:29,400 Speaker 1: the election risk subside, and you know vaccine sentiments improved, 426 00:23:29,720 --> 00:23:32,800 Speaker 1: Latin America for FFX is gonna is gonna rally off 427 00:23:32,800 --> 00:23:34,719 Speaker 1: the back of US. I mean, so you know, for me, 428 00:23:34,800 --> 00:23:37,480 Speaker 1: I'm actually looking at a basket of Latin American currencies 429 00:23:37,520 --> 00:23:40,800 Speaker 1: for example, Brazil, Mexico, Chile, Colombia. You know, that's sort 430 00:23:40,800 --> 00:23:43,439 Speaker 1: of a way of playing for you know, um, you know, 431 00:23:44,160 --> 00:23:47,119 Speaker 1: good news after the election, right and so um, So 432 00:23:47,200 --> 00:23:48,679 Speaker 1: that's one thing that you know, we think a lot 433 00:23:48,680 --> 00:23:51,280 Speaker 1: of investors should take a long, hard, good, a long 434 00:23:51,320 --> 00:23:54,640 Speaker 1: look at here in the current environment, Well what evaluations like, 435 00:23:54,840 --> 00:23:57,680 Speaker 1: I mean, what's priced in our people already sort of 436 00:23:57,800 --> 00:24:02,000 Speaker 1: getting involved? Is it already of date? Now? Latin America 437 00:24:02,040 --> 00:24:04,480 Speaker 1: is one that's really lagged the broader complex. So it's 438 00:24:04,480 --> 00:24:06,919 Speaker 1: one that we like, I mean, like Brazil. Like Brazil 439 00:24:07,000 --> 00:24:09,240 Speaker 1: has itsissues, but in my opinion, it's going to receive 440 00:24:09,280 --> 00:24:12,680 Speaker 1: some tactical re leafs, primarily because short positioning remains elevated, 441 00:24:12,920 --> 00:24:15,600 Speaker 1: the macro risks are abating, and quite frankly, the budget 442 00:24:15,600 --> 00:24:17,280 Speaker 1: discussions are going to be pushed out, so left it 443 00:24:17,320 --> 00:24:19,960 Speaker 1: in November municipal elections, so you could have a two 444 00:24:20,000 --> 00:24:22,840 Speaker 1: to three month window here where the RAYL really regains 445 00:24:22,880 --> 00:24:24,600 Speaker 1: a lot of the lost ground in the rails off 446 00:24:25,400 --> 00:24:27,600 Speaker 1: of the dollar year today it's Banni, So you know 447 00:24:27,640 --> 00:24:30,119 Speaker 1: that would be one. Mexico's another. You know, Mexico is 448 00:24:30,200 --> 00:24:33,040 Speaker 1: now testing that twenty one level, that key twenty one 449 00:24:33,119 --> 00:24:35,439 Speaker 1: level in the currency, and you know, if it breaks 450 00:24:35,440 --> 00:24:37,119 Speaker 1: below that, you know we could easily see it go 451 00:24:37,160 --> 00:24:40,320 Speaker 1: down to levels we saw a pre pandemic, and so 452 00:24:40,560 --> 00:24:43,280 Speaker 1: you know, again these are currencies are ways to kind 453 00:24:43,280 --> 00:24:46,680 Speaker 1: of more liquid, cheaper ways to play for a US 454 00:24:46,720 --> 00:24:49,639 Speaker 1: equity market reopening or sort of a recovery basket, so 455 00:24:49,680 --> 00:24:51,560 Speaker 1: to speak, because as we know, a lot of value 456 00:24:51,560 --> 00:24:54,679 Speaker 1: stocks in the US are still quite crazy, right And 457 00:24:54,720 --> 00:24:58,040 Speaker 1: of course it all depends on you know, whether we 458 00:24:58,080 --> 00:25:00,440 Speaker 1: get back to trade discussions on how that works as well, 459 00:25:00,520 --> 00:25:03,520 Speaker 1: and immigration policy and so on. So really, you know, 460 00:25:03,560 --> 00:25:07,199 Speaker 1: the change that might occur with this election could have 461 00:25:07,320 --> 00:25:10,760 Speaker 1: a big influence on valuations. Now, well, it already is. 462 00:25:10,760 --> 00:25:12,359 Speaker 1: I mean, just look at the China you on, I mean, 463 00:25:12,359 --> 00:25:14,080 Speaker 1: and we're at the strongest level. I think we're six 464 00:25:14,160 --> 00:25:16,119 Speaker 1: sixty four dollar you on now, I mean, that's the 465 00:25:16,160 --> 00:25:19,159 Speaker 1: strongest level we've seen since July eighteen. And look, you know, 466 00:25:19,200 --> 00:25:22,240 Speaker 1: I've long been an advocate of receiving in China. UM 467 00:25:22,880 --> 00:25:25,840 Speaker 1: the People's Bank of China wants a stable affirm currency 468 00:25:25,840 --> 00:25:29,200 Speaker 1: to attract for an influence, it's maintaining domestic confidence. And look, 469 00:25:29,200 --> 00:25:32,119 Speaker 1: it's the only central bank in Asia to embark on 470 00:25:32,320 --> 00:25:35,480 Speaker 1: effects intervention where they're actually selling dollars in the last 471 00:25:35,600 --> 00:25:38,200 Speaker 1: year through August, So you know, that's you know, it's 472 00:25:38,240 --> 00:25:41,359 Speaker 1: it's actually coming out of the pandemics much stronger than 473 00:25:41,400 --> 00:25:43,439 Speaker 1: its peers, and it's one area that we like to 474 00:25:43,440 --> 00:25:45,800 Speaker 1: look at. But you know, there is beneath the surface 475 00:25:45,920 --> 00:25:47,960 Speaker 1: some fiscal vulnerability. I mean, we put out of debt 476 00:25:48,000 --> 00:25:50,800 Speaker 1: just this morning, Vonnie talking about e mxternal debt ratios 477 00:25:50,800 --> 00:25:53,119 Speaker 1: which are rising across the whole of emerging markets. I 478 00:25:53,119 --> 00:25:56,720 Speaker 1: mean full year hard currency debt issue and from emerging 479 00:25:56,760 --> 00:25:59,680 Speaker 1: markets is on track to eclipse seven hundred and fifty 480 00:25:59,720 --> 00:26:02,840 Speaker 1: billion dollars this year. The former high was in only 481 00:26:02,840 --> 00:26:05,200 Speaker 1: four hundred and seventy one billions, So they are levering 482 00:26:05,280 --> 00:26:08,400 Speaker 1: up and that is certainly a risk going forward. Yeah, 483 00:26:08,440 --> 00:26:11,720 Speaker 1: for sure, Damian, you mentioned, you know, six sixty four 484 00:26:11,800 --> 00:26:14,800 Speaker 1: on the off shore, you on, this has been creeping lower. 485 00:26:14,840 --> 00:26:16,640 Speaker 1: I mean it was around six seventy for a long time, 486 00:26:16,680 --> 00:26:18,840 Speaker 1: and then there was a big range between the off 487 00:26:18,840 --> 00:26:21,920 Speaker 1: shore and the on shore that's now narrowed. What's going 488 00:26:21,960 --> 00:26:24,880 Speaker 1: on with the Chinese currency, Well, I think the reason 489 00:26:24,960 --> 00:26:27,399 Speaker 1: we saw that that the entrere off shore basis, you know, 490 00:26:27,480 --> 00:26:29,600 Speaker 1: widen out, had more to do with the fact that 491 00:26:29,840 --> 00:26:31,800 Speaker 1: you know, China was on vacation for eight days. But 492 00:26:31,880 --> 00:26:34,040 Speaker 1: you know, now that's kind of it's kind of subsided, 493 00:26:34,440 --> 00:26:36,320 Speaker 1: you know, for me, the best way to express a 494 00:26:36,400 --> 00:26:39,800 Speaker 1: China view if your bullish on China is through the 495 00:26:39,840 --> 00:26:41,600 Speaker 1: short end of the curve, right, I mean, like everyone's 496 00:26:41,600 --> 00:26:44,200 Speaker 1: talking about receiving in the belly and China government bonds 497 00:26:44,280 --> 00:26:46,560 Speaker 1: at three and five year tenners. But you know, for me, 498 00:26:46,640 --> 00:26:48,959 Speaker 1: I mean you can get you know, one to two 499 00:26:49,000 --> 00:26:51,399 Speaker 1: hundred basis points above treasuries just by carrying on a 500 00:26:51,480 --> 00:26:54,879 Speaker 1: one year or less basis right, So using efforts forwards 501 00:26:55,000 --> 00:26:58,040 Speaker 1: to not only take advantage of a strengthening currency relative 502 00:26:58,080 --> 00:27:01,840 Speaker 1: to the US dollar and also very large pickup over treasuries. 503 00:27:02,080 --> 00:27:04,000 Speaker 1: It's a really nice it's a really nice way to 504 00:27:04,000 --> 00:27:07,240 Speaker 1: play this market into your end in my opinion, Damien, 505 00:27:07,400 --> 00:27:11,119 Speaker 1: really fascinating speaking with you. Always are you coming? You see, 506 00:27:11,320 --> 00:27:12,960 Speaker 1: you know a matrix when you look at markets, and 507 00:27:12,960 --> 00:27:14,639 Speaker 1: it's just really it's really great. And of course you 508 00:27:14,680 --> 00:27:18,080 Speaker 1: have all of the um history as well, so it 509 00:27:19,040 --> 00:27:22,199 Speaker 1: rings bells. I'm sure for you to other ears and 510 00:27:22,400 --> 00:27:26,280 Speaker 1: eras and other years. Damien Sasaur joining us there. He 511 00:27:26,520 --> 00:27:32,520 Speaker 1: is chief Emerging Markets credit strategist for Bloomberg Intelligence. Thanks 512 00:27:32,520 --> 00:27:35,840 Speaker 1: for listening to Bloomberg Markets Podcast. You can subscribe and 513 00:27:35,880 --> 00:27:39,680 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 514 00:27:39,720 --> 00:27:43,160 Speaker 1: you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn. 515 00:27:43,320 --> 00:27:46,000 Speaker 1: And Paul Sweeney I'm on Twitter at pt Sweeney. Before 516 00:27:46,040 --> 00:27:48,880 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg 517 00:27:48,960 --> 00:27:49,200 Speaker 1: Radio